Question

Reply to the each discussion post in your own words. Be specific and to the point.

Post 1:

The single most important factor that lead to the Great Depression was certainly the stock market crash in 1929. What lead to the stock market crash was that the stocks were way overvalued for what they were. The market had undergone a huge and quick expansion in the 1920's which caused the overvalued stocks, once they started to decline people panicked and sold their stock. Investors and banks tried to stabilize the market by buying up stock but it didn't work. The stock market crashed and it was the beginning of the Great Depression.

Yes a similar economic calamity is possible in modern times, we had the great recession in 2008/2009 to prove that. Some people have said that the great recession was just as bad as the great depression. The difference is that we learned from the mistakes of the great depression like raising interest rates instead of lowering them and we have government programs in place now to help people out like unemployment and welfare which were made because of the great depression. We would be in a better position now if we were to have another Great Depression than we were in the 1930's when the Great Depression went on.

Post 2:

Without a doubt, the most important factor that led to the Great Depression was government’s poor decisions. The government tried to help the economy, but made it worse. The decisions on tariffs, interest, and income tax rates were the complete opposite of what they should have done. There has been many recessions and the economy has bounced back much quicker. If the government made better policy choices the Great Depression would have not been so severe and the recovery time would have been shorter.

It is definitely possible to have this happen again. If the government makes bad choices, it could put us into a long depression. The economy is very sensitive to adjustments. The government making bad choices or over adjusting can swing the economy. Even under adjusting can be unhelpful in certain situations. I really hope that with past knowledge and advances in technology and communication this will not happened again, but it could.

Answer 1

Post 1) Yes, definitely we would be in a better position now if we were to have another Great Depression. We have learnt a lot from the past. Economists have done intensive research over a century now and now agree that the economy will not revive of its own rather it need some corrective measures (including corporate bailout/ employment generation) from the government to help come out of recession.

Post 2) The government making bad choices or over adjusting can swing the economy. The past knowledge, research, and advances in technology and communication has made us cautious and vigilant. To avoid recession like 1930s, government will take n numbers of measures required (eg: basel 3 norms for banks to mitigate risk). However, if recession comes again then the government have many ways/strategies to minimize the repercussions of it, so that it wont lead to a great depression like 1930s. On the point of stock market rally in boom time, its very normal of markets being over valued as a part of its cycle, rally and corrections are very normal. What crashes the stock market is panic selling and frighten of losing all the worth invested in the market.